May 10 – Fitch Ratings has affirmed Morocco-based Societe Generale Marocaine de Banques’ (SGMB) National Long-term rating at ‘AAA(mar)’ with Stable Outlook, Short-term rating at ‘F1+(mar)’ and Support Rating at ‘2’. SGMB’s National Long- and Short-term ratings and Support Rating are underpinned by the high probability of support it is likely to receive from its majority shareholder, Societe Generale (SG; ‘A+’/Negative/’F1+’), if needed. Given SG’s good position in North African countries and history of support to group entities, Fitch believes that SG would have a very high propensity to support SGMB, but support is constrained by Morocco’s Country Ceiling of ‘BBB’. SG holds a long-standing controlling 56.9% stake in SGMB, which was the fourth-largest bank in Morocco by total assets at end-2011, with around 9% market share of deposits and loans. SGMB is well integrated into SG, which tightly controls its Moroccan subsidiary. Supervisory board and senior management responsibilities are broadly shared with SG group members, and SGMB’s credit, liquidity and market risks are overseen by the parent. SGMB’s satisfactory profitability ratios (operating ROAE and ROAA at 23.3% and 2.4% respectively in 2011) have been supported in recent years by a dynamic lending activity, continuing in 2011, although at a lower pace. Unless the Moroccan economy weakens sharply in 2012 as a result of a potential intensification of the eurozone crisis, SGMB’s profitability should remain stable. Fitch believes that SGMB’s improving credit underwriting and recovery capabilities should help contain its credit costs in 2012 (loan impairment charges/average gross loans at 0.8% in 2011) despite a possible economic slowdown and high obligor concentration in SGMB’s loan book, which increases vulnerability. The top 10 on- and off-balance sheet group obligors net of SG guarantees accounted for 1.4x SGMB’s Fitch core capital at end-2011. The higher impaired loans/gross loans ratio at end-2011 (7.3% versus 6.4% at end-2010) mainly reflected SGMB’s tightened loan classification policy in view of credit risk deterioration in the Moroccan tourism and export-oriented SME sectors. Net impaired loans/equity was at a moderate 16.3% at end-2011. SGMB’s funding is prudently managed and relies on a stable and fragmented client deposit base (73.5% of non-equity funding at end-2011). Since 2009, SGMB has been directing costly client term deposits towards certificate of deposits (CD) and bond subscriptions. Recourse to market funding remains limited and refinancing needs are prudently managed. In addition, the bank benefits from a EUR100m standby credit line with SG, in case of liquidity stress. Fitch considers SGMB’s Fitch core capital and Basel II Tier 1 ratios (10.6% and 9.75%, respectively, at end-2011) to be only acceptable, given the bank’s loan book concentration.
(Caryn Trokie, New York Ratings Unit)
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